This is the beginning of our own journey to fulfill the dream of owning a homestead that would be self-sustaining and we could grow old together on. A LOT of things had to come into play before we could even think about buying land and/or a home. Then we had to find the perfect one. Then we had to make it happen. My goal is to share my experience with others from what we did and learned along the entire journey.
So what’s my first piece of advise? CHECK YOUR CREDIT SCORES! LOL
Sounds easy at first. But, we had a few unique situations. Darling Husband had 0 credit. YES, after buying and owning several homes, cars etc etc. he had NOTHING on his credit report. Why? Because for the last 17 years he paid cash for everything! If he didn’t have the money in the bank, he didn’t buy it. GREAT to not go in dept, but not so much if you need to get a mortgage. And we needed to rely on his because he was the one with the job. At the time I wasn’t working and even though my credit was ok, it wasn’t going to help much without a job.
So 2-3 years ago, my first step was to build our credit. We started with the bank we do our checking at and applied for a card. Used it wisely. Paid it religiously. In 6 months, they raised the limit. Instant credit report! Then we looked at several others and went with another card that had several benefits. Yes, the limits started small. But when you pay on time and don’t abuse the credit (stay under 10-30% usage at any time), the credit card companies will gladly raise your limits. Then the offers just flooded in. We did NOT just get any credit offered us. We were picky. Like got an Amazon card that gave back points we could use for future purchases. Bonus for us since we buy on Amazon a LOT! It’s like getting an item on sale! Another card that gives cash back as you spend. Get the idea? Forget the frequent flyer miles, you want the cash! The entire first year or two I applied all the cash back to the card. Most companies give you that option.
Within 2 years he had a good standing credit rating again. The age of the credit keeps it under excellent, but all the big important reporting items for the credit score were in the excellent range.
So what can you start doing today?
- Pay every single bill on time!
- Pay down your debt. Even if it’s only $1 a month! Your Credit utilization Ratio is 35% of your FICO credit score. That’s pretty important. Get it under the 30% debt ratio or even better, under 10%. “What is a Credit utilization Ratio” my daughter asks? It’s the ratio of credit limits to how much you are using. To figure out your own, you simply divide your credit card balance by your available credit line. So if you have spent $400 out of a possible $2,000 this month, your debt-to-credit ratio is 20%. I raised our credit score a whomping 35 points in 2 days just by knowing how much I needed to pay off a debt to get it under the 30% ratio that a Lender likes to see. And I did it 3 days before we applied for the mortgage loan. It made a huge difference in the APR we were offered.
Going Forward for the Goal:
If you have an established credit report you need to look at every item! Go to a site like Credit Karma for free and get a copy of your score and a report. Don’t pay some middle man with big promises that can’t keep to do what you can do for free and a little bit of your time!
And you should keep an eye on it monthly to see your progress also. It helps the attitude of doing this when you see it creeping up. The wonderful thing about a site like them is you can also run simulator’s to see what would happen if you paid something off or took out additional loans or even just got the limit raised on a card. Was a valuable tool to have.
What to check on the Report:
- Is everything on there yours? I had a $40k loan out in Michigan that I never applied for! It was in good standing and after informing the Credit Agency it was not mine, we came to find out it was one digit off from my Social Security and reported incorrectly. They removed it.
- Is anything outdated? You can google just about any kind of credit account to find out how long it should stay on your report. Anything older than that, ask them to remove. Everything has a limit that it can stay on your report. Don’t worry about anything that is in good standing. Worry about that occasion 7 years ago when you forgot to pay a bill and didn’t realize it until a month later. Yep, put a bad mark on your report. Ask for it to be removed.
- Confirm your limits and balances are correct. I had an old auto loan that was paid off that still showed a small balance. The lender never reported it was paid off. A simple request to confirm the balance is all it took for it to be corrected.
What to do about other items on your report:
- Did you know you can call and negotiate with your creditor? Yep! Ask if you pay off the debt if they will remove the bad comments.
- Did you know you can negotiate your interest rates on a lot of different items? Ask for a lower rate! This works very well if you’ve had an account with them over 2 years in good standing. Now you can make the same monthly payment but more goes towards your principal owed. Pays down the debt even faster.
- Even worst case, if you had a period of time say you were out of work or had an emergency and fell behind on your payments, you can alway make a comment on your report in your behalf. Doesn’t always help your score, but it will help a little when a lender checks your report.
I hope some of this helps. We all have to learn it no matter what level we are at. If you have a specific question feel free to ask me. If I know the answer I’ll share. If I don’t, we can research it together.
Want a FREE worksheet for Credit-to-Debt Tracking?
It’s on my Google drive, so you can download and use as you like. I did write in a ‘How to Use’ also. If you have any questions, please feel free to contact me.
Next up? What to do during that period of time of getting ready to buy.